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The HSBC Flash PMI rose to a four-month high of 50.1, from 47. 7 in July.
“China’s manufacturing growth has started to stabilize on the back of modest improvements of new business and output. This is mainly driven by the initial filtering through of recent fine- tuning measures and companies’ restocking activities, despite the continuous external weakness,” said Qu Hongbin, chief economist for greater China and co-head of Asian Economic Research at HSBC.
The Flash PMI is based on a survey of purchasing executives in Chinese companies.
An index figure above 50 signals expansion, while below 50 signals contraction.
“We expect further filtering through, which is likely to deliver some upside surprises to China’s growth in the coming months,” Qu added.
The country’s growth has eased to 7.5 per cent in the second quarter from 7.7 per cent in the first three months of the year.
China’s new leadership has indicated that they would be willing to accept a slowdown to some extent even as they push through reforms.
The Flash PMI is published on a monthly basis, approximately one week before final PMI data are released, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China.
The final HSBC PMI for August is due to be published on 2nd September.